by Stockwatch Business Reporter
West Texas Intermediate crude for December delivery lost $1.37 to $82.50 on the New York Merc, while Brent for December lost $1.21 to $84.61 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.45 to WTI, down from a discount of $13.30. Natural gas for November lost five cents to $5.12. The TSX energy index lost 2.31 points to close at 155.15.
While oil prices were in the red, Canada's largest energy companies focused on looking green. The Oil Sands Pathways Alliance, a five-member group comprising Canadian Natural Resources Ltd. (CNQ: $52.39), Cenovus Energy Inc. (CVE: $14.38), Imperial Oil Ltd. (IMO: $42.50), MEG Energy Corp. (MEG: $11.23) and Suncor Energy Inc. (SU: $27.94), outlined a three-phase plan this morning to achieve net zero emissions by 2050. The members of the group currently account for 90 per cent of current oil sands emissions. They formed their loftily named alliance four months ago and have now set some equally ambitious (if still rather vague) numerical targets.
Specifically, the group says it can eliminate 68 megatonnes of annual emissions from the oil sands over the next 30 years. (The Alberta government estimates the oil sands' current annual emissions at 70 megatonnes.) In the first phase, from 2021 to 2030, the group wants to eliminate 22 annual megatonnes by creating a regional "carbon capture network." This will involve installing carbon capture equipment at numerous oil sands facilities, connecting those facilities to a proposed carbon transportation line and then moving the carbon down the line to a proposed storage hub in the Cold Lake area.
The next two decades will have their own phases and eliminate a combined 46 megatonnes. The group did not have much to say about those phases yet; it said it is still working on feasibility studies and pre-engineering activities for the first phase.
This being an early-stage proposal, the group did not lay out any cost estimates. It did, however, claim that the project is similar to other global carbon capture and storage (CCS) projects, which are receiving hefty government funding. For example, the group noted that the Dutch government has committed billions of dollars to the Porthos CCS project in the Netherlands, while at the Northern Lights CCS project in Norway, the Norwegian government is covering two-thirds of the capital costs and the first 10 years of operating costs. Hint, hint, Ottawa.
CCS was a theme today in more than the oil sands. Over in Saskatchewan, Grant Fagerheim's Whitecap Resources Inc. (WCP) lost 17 cents to $7.49 on 5.12 million shares, after signing an agreement with the Saskatoon-based Federated Co-operatives Ltd. (FCL). FCL and Whitecap will work together to capture carbon from a refinery complex in Regina and an ethanol complex near Belle Plaine. Whitecap will then move the carbon to Weyburn to an oil project of the same name. (The Weyburn project is in fact a dual oil field and CCS facility. The owners of the field, led by Whitecap with a 65-per-cent interest, pump carbon dioxide into the field as a way of coaxing oil out. Whitecap enjoys boasting that these injections offset the emissions from all of its other projects, making the company not only carbon neutral but "carbon negative.")
Whitecap did not disclose financial details in the press release, so investors had to be satisfied with an abundance of back pats. "We are excited to partner with FCL to support its plans for decarbonization," cheered Mr. Fagerheim, chief executive officer of Whitecap. CEO Scott Banda of FCL in turn toasted Whitecap for helping his company "integrate sustainable solutions ... to improve environmental performance." Even the Saskatchewan government took a bow, with provincial Energy and Resources Minister Bronwyn Eyre popping in to declare that Saskatchewan is "a world leader in innovative carbon capture technology." It is worth noting that at this stage, the agreement is just a memorandum of understanding, and the earliest expected completion date for the facilities is 2024 to 2026.
Back in Alberta, Doug Bartole's Cardium-focused InPlay Oil Corp. (IPO) lost five cents to $1.60 on 402,000 shares. It closed an $11.5-million bought deal at $1.20 yesterday afternoon. The money will go toward the cash component of InPlay's proposed cash-and-share takeover of Prairie Storm Resources Corp. (PSEC: $0.30), another Cardium junior (as announced last month). InPlay reminded investors that it expects to close the acquisition by the end of next month.
Investors seem to have high hopes for InPlay's acquisition; the bought deal subscribers are already sitting on 33-per-cent gains on paper. InPlay won fresh rounds of applause from analysts today. In a research note this morning, ATB Capital analyst Patrick O'Rourke upgraded InPlay to "outperform" from "sector perform," while increasing his price target to $2.25 from $1.75. "The acquisition [of Prairie Storm] should help to improve [InPlay's] relevance with institutional investors," opined Mr. O'Rourke. He called the deal "a clear positive." Meanwhile, Canaccord Genuity analyst Anthony Petrucci said the deal makes "considerable sense" and gives InPlay a "very compelling" valuation. He hiked his price target all the way to $3 from $2.25. It may come as no surprise to investors that Canaccord and ATB, the respective employers of Mr. O'Rourke and Mr. Petrucci, were both involved in yesterday's bought deal. ATB co-led it and Canaccord was one of the underwriters.
Another Cardium player, Don Gray's Petrus Resources Ltd. (PRQ), added one cent to 81 cents on 53,300 shares. It has passed its TSX delisting review. The review started automatically about six weeks ago, when Petrus arranged a series of "transformative transactions to reduce debt and position [the] company for renewed growth." In other words, it traded a whole bunch of debt for shares and raised a bunch more money in equity. (The financings also gave the Gray family the opportunity to shore up control. Three Gray brothers, namely Don, Glen and Stuart -- the first of whom founded Petrus in 2011 and serves as chairman -- now hold about three-quarters of the company's stock. Brother No. 4, Ken, has been serving as president and CEO since April.)
The financings triggered a delisting review because Petrus relied on a "financial hardship" exemption (to avoid the need for shareholder approval). The TSX told Petrus that it had until Jan. 5, 2022, to prove that it should keep its listing. Clearly the review did not take that long.
With the above debt and compliance issues behind it, Petrus will likely try to return investors' focus to its operations. The company is currently producing around 6,000 barrels a day. While it has not updated the presentation on its website since August, it claimed at the time to be "primed for growth through a focused strategy," just as soon as it got a better handle on its balance sheet.